Question

If supply is unchanged, but demand increases, we can conclude that the new equilibrium:

a. Quantity must increase but market price may fall, stay the same or even increase.
b. Price must fall but market quantity may fall, stay the same or even increase.
c. Price must increase but market quantity may fall, stay the same or even increase.
d. Quantity must decrease but market price may fall, stay the same or even increase.
e. Both market quantity and market price must increase.

Answer 1

The correct answer is option e.

Step-by-step explanation:

The supply in the given example is assumed to be unchanged. Supply being constant an increase in demand will cause the demand curve to shift to the right. This rightward shift in the demand curve will intersect the supply curve at a higher point. This will cause an increase in the price as well as quantity of output in the market.

So, option e is the correct answer.